Peres said on Saturday that the talks could be resolved in days and would put Sharon’s Gaza pullout plan back on the agenda.

"The will of the people ... is to have a unity government in which its main issue and goal is to carry out the [Gaza] pullout," he said in Tel Aviv. "If we join the government and see there's no disengagement ... we'll leave," he said.

"But will we leave if there will be another step towards peace after the pullout? Of course not," he added.

Sharon's plan to "disengage" from with the Palestinians consists of evacuating all 21 Jewish colonies in Gaza but only four of the 120 in the West Bank, in 2005.

Sharon courts Peres

Sharon had phoned Peres, his old ideological rival, on Friday to invite his party to join after Likud members voted on Thursday to overturn its earlier ban on negotiating an alliance.

Peres (L), served as Sharon's foreign minister from 2001-2002

But haggling over ministry portfolios, differences over the budget and the entry of two Orthodox Jewish parties could slow the process.

Peres, 81, a Nobel Peace Prize winner, and Sharon, 76, a former general who once championed the settler movement, have forged such an alliance before. Peres served as foreign minister under a Sharon-led unity government from 2001 to 2002.

This time, Sharon is expected to keep the top portfolios in Likud hands while offering Peres the post of deputy prime minister, political sources said.

Polls show most Israelis favour parting with impoverished Gaza, but hardliners are against returning any of the Palestinian territories seized after the 1967 Middle East war.

Palestinians fear it is a ruse to cement Israel's hold on the West Bank, where the vast majority of settlers live.

"Disengaging from Gaza is not easy," Peres said. "It's hard to evacuate settlers and settlements. The price is peace. We are joining [the government] in order to make peace."

The results of coalition negotiations would still need to be approved by Labour's central committee before the party can join Sharon's government.